J. A. Clyde-Smith, Esq., Commissioner and Jurats Le Cornu and Milner
IN THE MATTER OF THE REPRESENTATION OF BARCLAYS PRIVATE BANK AND TRUST LIMITED AND BARCLAYS PRIVATE CLIENTS INTERNATIONAL LILMITED
AND IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLE 48D OF AND THE SCHEDULE TO THE BANKING BUSINESS (JERSEY) LAW 1991
Advocate G. S. Robinson for the Representors.
1. On 5th June, 2014, the Court sanctioned a scheme under the Banking Business (Jersey) Law 1991 ("the Banking Law") whereby, in essence, Barclays Private Bank & Trust Limited ("BPB&T") would transfer its banking, investment business and funds services business to the Jersey branch of the Isle of Man Company, Barclays Private Clients International Limited ("BPCI"), whilst retaining its trust company business. Assets and liabilities to be transferred to BPCI would include over £2.7 billion in client deposits, over £388 million in loans and advances and over £2.1 billion of assets under management.
2. Article 48D of the Banking Law provides that the Schedule to the Banking Law has effect to regulate any transfer of deposit-taking business from one registered deposit taker to another. Both BPB&T and BPCI, Jersey Branch, are registered by the Jersey Financial Services Commission ("the Commission") to undertake deposit-taking business.
3. The Schedule to the Banking Law requires the sanction of the Court to any scheme where the whole or part of the deposit-taking business carried on or from Jersey is to be transferred from one registered person to another. The Schedule provides in particular that the Court shall not determine any application for sanction unless the Court is satisfied that:-
(i) an independent auditor's report has been obtained (paragraph 3);
(ii) appropriate notice has been given (paragraph 4);
(iii) the transferee is authorised to carry on the deposit-taking business to be transferred under the scheme (paragraph 7).
4. The principles to be applied by the Court in the exercise of its discretion to sanction a scheme under the Banking Law were considered in the case of Re Standard Chartered (Jersey) Limited  JRC 210. The Court applied the principles which had been applied previously in analogous cases for the transfer of insurance business. Quoting from paragraphs 9 and 10 of the judgment of Bailhache, Deputy Bailiff:-
"Interestingly this lack of statutory guidance does not appear to be a wholly Jersey phenomenon. In the matter of Alliance and Leicester Plc and Santander UK Plc  ECHC 2858 (Ch) Henderson J had to consider an application under Section 111(1) of the Financial Services and Markets Act 2000 sanctioning a transfer of the banking, mortgage and other financial activities business then carried on by Alliance and Leicester Plc to Santander UK Plc, of which Alliance and Leicester was a wholly owned subsidiary. At paragraph 42 of his judgment, Henderson J said this:-
'I come finally to the exercise of the Court's discretion. There is apparently no reported authority on the approach that the court should adopt in relation to the transfer of a banking business. However there is plenty of authority in relation to the long established jurisdiction of the Court to approve transfers of long term insurance business under Schedule C to the Insurance Companies Act 1982. The passages which are usually cited in that connection are from the unreported judgment of Hoffman J, as he then was, in Re London Life Association Limited 21st February 1989, and the subsequent decision of Evans-Lombe J in Re AXA Equity and Law Life Assurance Society and AXA Sun Life Plc  1 All ER (Comm) 1010.'
11. Both those decisions have been cited to the Royal Court in connection with applications to approve transfers of long term insurance business in Jersey. The Re AXA Equity and Law Life Assurance Society  1 All ER (Comm) 1010 case was cited by Birt, Bailiff in the matter of the Representation of Royal London 360 Limited and Royal London 360 Insurance Company Limited  JRC 192, where, having referred to that case, he said at paragraph 3:-
'...and we would take the opportunity of transposing what Evans-Lombe J said in that case into the Jersey context so that in our judgment the principles to be applied in such cases are as follows:-
(i) the 1996 Law confers an absolute discretion on the Court whether or not to sanction a scheme but this is a discretion which must be exercised by giving due recognition to the commercial judgment entrusted by the company's constitution to its directors;
(ii) the Court is concerned whether a policyholder, employee or other interested person or any group of them will be adversely affected by the scheme;
(iii) this is primarily a matter of actuarial judgment involving a comparison of the security and reasonable expectations of policyholders without the scheme with what would result if the scheme were implemented. For the purposes of this comparison the 1996 Law assigned an important role to the independent actuary to whose report the Court will give close attention;
(iv) the Jersey Financial Services Commission, by reason of its regulatory powers, can also be expected to have the necessary material and expertise to express an informed opinion on whether policy holders are likely to be adversely affected. Again the Court will pay close attention to any views expressed by the Jersey Financial Services Commission;
(v) that individual policyholders and groups of policyholders may be adversely affected does not mean that the scheme has to be rejected by the Court. The fundamental question is whether the scheme as a whole is fair as between the interests of the different classes of persons affected.
(vi) It is not the function of the Court to produce what, in its view, is the best possible scheme as between different schemes all of which the Court may deem fair. It is the company's directors' choice which to pursue.
(vii) Under the same principle the details of the scheme are not a matter for the Court provided that the scheme as a whole is found to be fair. Thus the Court will not amend the scheme because it thinks that individual provisions could be improved upon.
12. All these principles (before transposition to the Jersey context) were also referred to and adopted by Henderson J at paragraph 49 of his judgment in Re Alliance and Leicester Plc and Santander UK Plc (supra)."
5. The jurisdiction of the Court under the Banking Law to transfer not only the banking business but also the investment business and the funds services business was considered by Commissioner Clyde-Smith at the earlier directions hearing in this matter Barclays Private Bank and Trust Ltd-v-Barclays Private Clients International Ltd  JRC 117. The inter-connectivity between the three businesses is explained in the affidavit of Mr Ashley Stuart Cox, a director of BPB&T dated 16th April, 2014. Assuming the sanctioning court accepted the factual position as presented by him, Commissioner Clyde-Smith found that the Court would have jurisdiction to sanction the scheme, saying at paragraphs 10 and 11:-
"At paragraph 26 of the [case of Representation of Standard Chartered  JRC 172], I said this:-
'In my view, provided the non-deposit taking activities are integral to the business to be transferred and have not been artificially grafted on to a deposit-taking activity in order to get through the jurisdictional gateway, the Court can exercise its discretion to sanction the scheme. From the description of the business of Standard Chartered Jersey given to me, which is distilled above, it is clear that the deposit-taking and investment management services are integral to each other, managed on a unitary basis and could not be separated without fundamentally altering the business proposition and model. On that basis there does not seem to be any good reason for the Court to decline to sanction the scheme on structural grounds.'
That test seems to me to be satisfied in this case. The funds services business is inextricably linked to the provision of investment advice as part of the overall proposition to clients of BPB&T and BPCI. The activity delegated to BPB&T is undertaken by exactly the same operational staff as the direct investment management business. It is part of Barclays Wealth Management from the market-facing perspective and internally the investment management business for clients of BPB&T and of BPCI is treated as a single unit for reporting, strategic and budgetary purposes. There is no suggestion that the services provided for clients of BPCI have been artificially grafted on to the business of BPB&T and there appears no good reason for it to be left behind in BPB&T with the trust company business.
It will be for the Court, on 5th June 2014, to consider the evidence of Mr Cox but on the assumption that it accepts the factual position as presented by him and is satisfied that the non-deposit-taking activities are integral to the business to be transferred and have not been artificially grafted on to a deposit-taking activity in order to get through the jurisdictional gateway, the Court will have jurisdiction under Article 48D to include in the transfer of the deposit-taking business of BPB&T both its investment business and its funds services business."
6. The Court was satisfied that the formalities of the Schedule to the Banking Law had been complied with:-
(i) An independent auditor's report had been obtained. Nothing had come to the attention of the auditor which would indicate a materially adverse effect on BPB&T's or BPCI's financial position or would indicate that BPB&T or BPCI would not have the ability to meet their liabilities following the transfer. This scheme did not appear to the auditor to disadvantage customers or creditors of BPB&T as a whole.
(ii) Appropriate notice had been given as earlier directed by the Court and no one had responded objecting to the scheme. By way of summary, a notice was published in the Jersey Gazette and due notice was given to the clients of BPB&T, to the members of BPB&T and BPCI, to the Commission, to those employees who would be transferred to BPCI and to BPB&T's material creditors and/or counter parties; notifications which go beyond the strict requirements of the Schedule to the Banking Law.
(iii) Pursuant to paragraph 7 of the Schedule, BPCI was appropriately authorised to conduct the deposit-taking business to be transferred.
7. The representors had consulted with the Commission throughout the process and it had confirmed that it had no objections or specific comments to make concerning the provisions of the scheme. The Isle of Man Supervision Commission had also provided its consent to the transaction, provided the Commission had no objection to the scheme.
8. The Court accepted the factual position as presented by Mr Cox and was satisfied that the non-deposit-taking activities were integral to the business to be transferred and had not been artificially grafted on to a deposit-taking activity in order to get through the jurisdictional gateway. The Court accordingly had jurisdiction to sanction the scheme.
9. As to the merits of the scheme, the Court noted that BPCI had a credit rating when BPB&T had none. It offered a better covenant and the current terms and conditions and services for transferring customers would remain the same.
10. The Barclays Group wished to re-organise its business in Jersey and due recognition had to be given to the commercial judgement of the directors concerned. No one would appear to be adversely affected by the scheme and no one had objected. There was nothing unfair that we could see in the scheme as a whole as between the interests of the various classes of persons affected. We therefore sanctioned the scheme.
Banking Business (Jersey) Law 1991.